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Does Household Borrowing Reduce the Trade Balance? Evidence from Developing and Developed Countries

Author

Listed:
  • Can Xu

    (University of Groningen)

  • Jan P. A. M. Jacobs

    (University of Groningen, CAMA and CIRANO)

  • Jakob de Haan

    (University of Groningen and CESifo)

Abstract

We examine the dynamic impact of household borrowing on the trade balance using data from 32 developing countries and 36 developed countries over the 1980-2020 period. Our findings suggest that the impact of household borrowing on the trade balance is negative, both in the short and long run, but the effects are more pronounced in developing countries. Moreover, we find that for developing countries the negative effect of household borrowing on the trade balance is achieved via boosting imports. In developed countries, household borrowing stimulates both imports and exports, where the effect on imports is larger.

Suggested Citation

  • Can Xu & Jan P. A. M. Jacobs & Jakob de Haan, 2023. "Does Household Borrowing Reduce the Trade Balance? Evidence from Developing and Developed Countries," Open Economies Review, Springer, vol. 34(4), pages 759-787, September.
  • Handle: RePEc:kap:openec:v:34:y:2023:i:4:d:10.1007_s11079-023-09713-w
    DOI: 10.1007/s11079-023-09713-w
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    More about this item

    Keywords

    Household borrowing; Trade balance; Dynamic effects; Panel ARDL; Panel VECM;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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